How many times can I convert to a Roth IRA?

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I have a question about some tax planning. Over the next few years, I am considering roll-over of IRA funds from my Traditional to my Roth in amounts such that my federal taxable income is still below the 25% marginal tax rate. I do understand that these withdrawals from my Traditional IRA will be in addition to my RMD. Is there a limit to how many times I can add roll-over funds to my Roth? Also, is there a limit to how much can be added?

I'd have to say that the tax rules regarding Roth conversions reflect that Uncle Sam is anxious to get his hands on your income tax payments...and he's not very patient. With that in mind, there's no limit to how much or how many times you can convert. However, I like your measured approach.

Clearly, you've decided that paying Federal income tax at a 25% clip now makes more sense for you and your situation than whatever the future holds as far as taxes are concerned. For the uninitiated, a conversion from traditional to Roth will require that taxes be paid on the untaxed amount converted. So, if you convert $25,000 from a pre-tax account to a Roth, you'll have to add $25,000 of income to your tax return. And, from a number-crunching standpoint, if the taxes paid at conversion are less than they would have been when withdrawn, you'll be a income tax winner. Of course, there are other reasons to convert, but from a pure tax standpoint, it's primarily about the taxes now vs. taxes in the future as they apply to your situation.

The reality is that there's an element of "crystal ball thinking" in figuring out if a conversion makes sense. That's because we can't know with certainty what the future holds. However, making use of the existing tax brackets like you are doing--creating taxable income to the top of the 15% or 25% bracket through a conversion--seems to me a reasonable approach.

With that said, it is important to remember that each conversion starts a new five year clock. In other words, even though you are over age 59 1/2, in order to enjoy tax free withdrawals of both what you converted (and paid taxes on) and the earnings you've got to leave the earnings untouched for five years. Since according to IRS rules, contributions and converted amounts are withdrawn before earnings, this may not be as difficult as it might seem.

Complex enough? Clearly, this is a great opportunity to consult with your tax advisor to make sure you stay on track. Good luck.